Why You Might Be Interested In Truecaller AB (publ) (STO:TRUE B) For Its Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Truecaller AB (publ) (STO:TRUE B) is about to trade ex-dividend in the next three days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase Truecaller's shares before the 26th of May in order to be eligible for the dividend, which will be paid on the 2nd of June.

The company's next dividend payment will be kr01.70 per share, on the back of last year when the company paid a total of kr1.70 to shareholders. Based on the last year's worth of payments, Truecaller has a trailing yield of 2.5% on the current stock price of kr067.25. If you buy this business for its dividend, you should have an idea of whether Truecaller's dividend is reliable and sustainable. So we need to investigate whether Truecaller can afford its dividend, and if the dividend could grow.

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Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Truecaller paid out a comfortable 28% of its profit last year. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out 22% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Truecaller's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Check out our latest analysis for Truecaller

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Truecaller's earnings have been skyrocketing, up 25% per annum for the past five years. Truecaller is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

Given that Truecaller has only been paying a dividend for a year, there's not much of a past history to draw insight from.

The Bottom Line

Is Truecaller worth buying for its dividend? Truecaller has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Overall we think this is an attractive combination and worthy of further research.

On that note, you'll want to research what risks Truecaller is facing. To help with this, we've discovered 1 warning sign for Truecaller that you should be aware of before investing in their shares.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.